Mortgages and Coronavirus - Information for Customers

7 Apr 2020

The FCA have issued new guidance on they expect mortgage lenders and administrators to treat customers fairly during this coronavirus (Covid-19) situation.

Payment holidays

A ‘payment holiday’ means you agree with your lender that you will not have to make mortgage payments for a set amount of time. Payment holidays are designed to help you when you may experience payment difficulties – in this case because of the coronavirus situation.

It is important to remember that you still owe the amounts that you don't pay as a result of the payment holiday. Interest will continue to be charged on the amount you owe.

This means that, at the end of the payment holiday, you will have to make up the missed payments. There will be various options for doing this, for example by increasing your monthly payments slightly, or by adding a short extension to your term. Your lender will be able to explain to you what options it offers.

Applying for a payment holiday

You should contact your mortgage lender if you are experiencing or reasonably expect to experience payment difficulties because of circumstances related to coronavirus.

What to do with direct debits

It is only a payment holiday if it has been agreed with your lender.

You should not cancel your direct debit without speaking to your lender first. Cancelling your direct debit is not a payment holiday and will be counted as a missed payment. This could show up in your credit file and may impact your ability to remortgage.

Interest on your mortgage during the payment holiday

You will still be charged interest during the payment holiday, unless your lender has told you otherwise.

When the payment holiday ends

At the end of the agreed payment holiday, you will continue to make payments. And you will need to agree with your lender a manageable way to make up the missed payments given your circumstances.

If you are still not able to make your full mortgage payments due to circumstances relating to coronavirus, then the lender may offer you a further payment holiday, or other arrangements, if these are appropriate to your circumstances.

Your credit file

The guidance makes clear to lenders that they should ensure that taking a payment holiday will not have a negative impact on your credit file.

Agreeing the payment holiday

We expect lenders to offer payment holidays to borrowers who are experiencing or reasonably expect to experience payment difficulties because of coronavirus, unless they consider another option is better suited and in your best interest. Many lenders have already committed to this.

Your lender may also offer other options if they are more appropriate for your circumstances, and where it is in your interest. You can discuss these with your lender.

You should not apply for a mortgage payment holiday if you are not experiencing or do not reasonably expect to experience payment difficulties.

If you are behind with your mortgage payments.

Lenders ar expected to offer payment holidays to borrowers who are experiencing or reasonably expect to experience payment difficulties because of circumstances related to the coronavirus, or another option better suited to your needs and in your best interest, whether or not you are already behind on your payments.

How long do I have to apply for a mortgage holiday?

You can apply for a payment holiday at any time before this guidance is reviewed in 3 months. The payment holiday will not start, however, until it has been agreed with your lender.

Contacting your lender at this time

Lenders have committed to responding as quickly as possible, but due to high levels of demand and staff having to work from home, service levels might be slower than usual.

You should speak to your lender in good time before the next payment is due.

Before calling:

Ask yourself: Do I need to speak to my mortgage lender today?

Consider: Can I do this through mobile online banking?

Review: Is the answer already on my lender’s website?

Repossessions

Lenders are temporarily stopping repossession actions

During this current period of unprecedented uncertainty and upheaval, people should be at risk of losing their homes. Therefore lenders are expected to stop repossession action. This applies to all mortgage borrowers at risk of repossession, whether or not their incomes are affected by coronavirus. Many lenders have already committed to this.

The Financial Ombudsman Service is an agency for arbitrating on unresolved complaints between regulated firms and their clients. More detail can be found on their website: www.financial-ombudsman.org.uk